Forget Merger Monday. In health care, it's Takeover Thursday. Deals totaling $40 billion were announced while most investors were still sipping their morning coffee.
- Medical device maker Abbott Labs (ABT - Get Report) agreed to buy competitor St. Jude Medical (STJ) for $25 billion in cash and stock.
- Sanofi (SNY - Get Report) made an unsolicited -- and so far unaccepted -- $9.3 billion takeout offer for biotech cancer drug maker Medivation (MDVN) .
- AbbVie (ABBV - Get Report) is buying privately held cancer drug developer Stemcentrx for $5.8 billion.
Thursday's parade of deals seems to answer a question that's been bugging health care investors for most of 2016: why haven't retreating biotech valuations sparked an uptick in M&A activity?
There's no single template for an acquisition, but the Sanofi and AbbVie deals share a common trait. Two large pharmaceutical companies are willing to shell out billions of dollars to strengthen their cancer drug portfolios.
Sanofi will likely need to raise its offer for Medivation to get the deal done, but there's less downside risk because Xtandi, Medivation's prostate cancer drug, is already a blockbuster, with 2015 sales of nearly $2 billion.
AbbVie's $5.8 billion bet on Stemcentrx is more of a gamble. Backed by Silicon Valley investor Peter Thiel, Stemcentrx has a lead lung cancer drug in an ongoing phase III study. The company has four other cancer drugs further back in the research pipeline. Terms of the deal call for AbbVie to pay another $4 billion to Stemcentrx investors based on future development and regulatory milestones.
AbbVie is throwing out aggressive amounts of cash to invest deep into cancer treatment as a way to lessen dependence on its blockbuster drug Humira, which is going to face competition from less expensive bio-similars. Humira accounts for more than 60% of AbbVie's total revenue.Last year, AbbVie bought Pharmacyclics for $21 billion, securing half the rights to the blood cancer drug Imbruvica.